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Low educational expectations for children placed in out-of-home care (OHC) are often proposed as a contributing factor to poor educational outcomes of children in OHC. However, very little empirical evidence exists on the association between educational expectations and educational outcomes of children in OHC, and the theoretical underpinnings of what drives a potential association are limited in the OHC literature. The purpose of this study is to contribute with theoretical and empirical knowledge about the relationship between educational expectations, individual characteristics and educational performance of children in OHC. We propose a theoretical model of the relationship between expectations and achievement and empirically test fundamental parts of the model using path analysis on survey, academic and psychometric data on 132–139 Danish children in foster care. Our findings show that educational expectations of teachers and foster mothers do matter for the children’s academic performance in math, while only the foster mothers’ educational expectations matter for reading performance. Educational expectations impact educational performance both directly and indirectly through the mediation of child characteristics. Importantly, our findings also show that the formation of the expectations of teachers and foster mothers draw on child age and observations of the children’s abilities and functioning including their level of IQ and psychosocial adjustment. Hence, we argue, that raising educational expectations alone is an insufficient measure to increase the educational performance of children in OHC. Instead, we must work to find suitable interventions to overcome the excessive prevalence of developmental and learning difficulties among children in OHC.